The crypto ATM business is flourishing in the United States, despite facing criticism for potential illegal or predatory behavior, as highlighted in a report from the Federal Reserve Bank of Kansas City. Here are the key points from the report:
1. Crypto ATMs, which facilitate the conversion of cryptocurrencies into fiat currency and vice versa, are gaining popularity in the U.S. The report indicates that these ATMs have a growing customer base that could benefit from improved education about cryptocurrencies.
2. Crypto ATMs are commonly located in high-traffic areas and charge a fee for their services. The average fee ranges from 15-16%, with some operators setting unfavorable conversion rates that can result in effective fees as high as 20%.
3. The report identifies four main user groups for crypto ATMs:
- Cash users who may be unbanked.
- Older individuals who find ATMs more familiar than crypto exchanges.
- Users attracted by the convenience of ATMs.
- Individuals seeking greater relative anonymity in transactions.
4. Crypto ATMs are subject to state and federal regulations, including Anti-Money Laundering (AML) requirements. Users are required to provide identification when using these ATMs.
5. A significant user group for crypto ATMs includes minority communities and immigrants. These groups often use the ATMs for person-to-person transactions like remittances.
6. The report highlights concerns about the crypto ATM industry engaging in predatory inclusion, potentially luring financially disadvantaged individuals into high-cost services disguised as opportunities for gaining access to lucrative financial investments.
7. The report cites Chainalysis data showing that victims of scams moved $345 million through crypto ATMs in 2022, indicating significant risks associated with these transactions.
8. Despite concerns, the crypto ATM industry is experiencing growth after a downturn caused by the COVID-19 pandemic. For instance, operator Bitcoin Depot went public in July and saw a substantial increase in revenue.
